Despite seeing economic headwinds in the short-term, and fall-out from the Presidential election, CBRE Global chief economist and head of Americas research Richard Barkham anticipates a recovery starting to take place in 2021. The executive has authored a new paper on the firm’s outlook for next year and was interviewed last week for CBRE’s Weekly Take podcast.
GDP growth this year appears to be at minus 4%, he said, but “we’re looking at the reverse of that in 2021, somewhere between 4% and 5% GDP growth.”
The projection takes into account a near-term delivery of a COVID-19 vaccine—likely in Q2 2021—and an economic stimulus package being distributed in the near-term. Further, he noted that the results of the Presidential election left the country “divided” but he doesn’t expect “radical policy departures.”
On the real estate front, Barkham had mixed expectations. “We’ve had the biggest economic shock in 100 years and we’ve hardly had cap rates moving at all; they have been…super resilient. So if they’re super resilient in the point of a crisis, then they’re only going to trend down when the crisis alleviates.”
He continued, “We’re going to see [office] vacancy rates continue to trend out in 2021. From Q2 and Q3 we’ll begin to see leasing pick up again. I don’t see that pick up in leasing activity in Q3 and Q4 substantially impacting headline rents until the end of 2022 or possibly into 2023. Companies might look at the next six to nine months as the sweet spot to do very advantageous deals on quality space in the most prime locations in the world.”
Barkham also is bullish on the multifamily segment. “Once you see the vast array of interesting things that you can do in the city coming back, then the future is reasonably bright for big city multifamily apartments. Rent collections have been way more stable than we ever thought possible.”
The life sciences sector is particularly poised to do well he noted, calling it “red hot,” and not just because of the Coronavirus pandemic, but rather because of its overall potential for discovery.
But the promise of a COVID-19 vaccine is what gives Barkham the greatest hope. “It’s testimony to the real vigour and inventiveness around the medical and the pharmaceutical industry. But it’s also the human spirit. It’s incredible how optimistic and raring to go the American people have remained, even in the tooth of this kind of political turmoil. The can-do attitude of Americans is really remarkable.”